Panama’s Ministry of Finance has published Resolution No. 201-1394 of 5 February 2025, approving the updated withholding tax Form No. 1119 (version 1).
The form is for the withholding tax introduced by Law No. 57 of 24 October 2018 on certain payments made by or to companies under the Multinational Enterprises Headquarters (sede de empresas multinacionales – SEM) regime.
Form No. 1119 (version 1) must be submitted electronically via the E-Tax 2.0 system and applies to 2019 and later fiscal periods.
Law No. 57 introduced several amendments to enhance the SEM regime and ensure alignment with BEPS Action 5 on Harmful Tax Practices.
Law No. 57 has been in effect since 1 January 2019.
This included a 5% income tax on SEM companies’ net income from services and a 5% withholding tax on payments by Panama taxpayers to SEM-licensed companies if the services impact Panama-source income or the payments are tax-deductible.
Additionally, a 5% withholding tax on 50% of payments to non-residents for services provided to SEM companies, including intellectual property rights, interest, and loan-related payments in Panama.
